China Express Airlines to Launch IPO

Chongqing-based China Express Airlines plans to launch an initial public offering (IPO) of up to 40.5 million shares on the Shenzhen Stock Exchange later this year, according to the China Securities Regulatory Commission (CSRC).

China Express intends to raise nearly 1.68 billion yuan ($240 million) and use the funds to acquire aircraft and engines and establish an aviation training school. It is scheduled to introduce Airbus A320 aircraft this year and will expand internationally to Southeast Asia, Japan and Korea. It plans to expand its fleet to from 26 to 66 aircraft by the end of 2020, comprising 50 CRJ900s and 16 A320s.

The company operates a fleet of 26 Bombardier CRJ900s and has passenger flights to over 70 destinations across China with 95 percent covering are regional routes.

While China Express accounts for 11 percent of regional routes by all Chinese carriers, it only has a one percent share of the domestic market shares.

Founded in 2006, China Express has five domestic bases in Chongqing, Dalian, Guiyang, Hohhot and Xi'an.

According to Zou Jianjun, a professor at the Civil Aviation Management Institute, there is increased demand for fast transportation in third- and fourth-tier cities. This demand will push the growth rate of the regional air market in China at a much faster than major air routes in the next three to five years. He noted that China is making structural adjustments and boosting the development of international and regional air routes.

China Express will become the eighth domestically listed airline in China if it gets approval for the IPO.

The airline specializes in regional routes, which account for 95 percent of its total business. Majority of its aircraft are 100-seater jets. Nearly 60 percent of flights last for less than one hour.

China Express reported sales revenues of 1.92 billion yuan, and profits of 329 million yuan and a net profit of CNY295.3 million ($43 million) for the first nine months of 2016. An industry source noted that over 20 percent of the company's net profit came from government subsidies.

The carrier also reported net incomes of 258.5 million yuan in 2015, 123.7 million yuan in 2014, and 99.5 million yuan in 2013.